ECO 212 Week 2 Individual Assignment Supply Demand and Price Elasticity Quiz

This work of ECO 212 Week 2 Individual Assignment Supply Demand and Price Elasticity Quiz shows the solutions to the following problems:

1. If a 20% decrease in the price of long distance phone calls leads to a 35% increase in the quantity of calls demanded, we can conclude that the demand for phone calls is:

a. elastic.

b. inelastic.

c. unit elastic.

d. stretchy elastic.

2. Which of the following pairs are examples of substitutes?

a. Popcorn & Pepsi

b. Automobiles & Bicycles

c. Boats & Fishing Tackle

d. Wine & Cheese

3. When we say that a price in a competitive market is “too high to clear the market” we usually mean that (given upward-sloping supply curves).

a. no producer can cover the costs of production at that price

b. quantity supplied exceeds quantity demanded at that price

c. producers are leaving the industry

d. consumers are willing to buy all the units produced at that price

4. Which of the following statements is incorrect? Assume upward-sloping supply curves.

a. If the supply curve shifts left and the demand remains constant, equilibrium price will rise.

b. If the demand curve shifts left and the supply increase, equilibrium price will rise.

c. If the supply curve shifts right and the demand curve shifts left, equilibrium price will fall.

d. If the demand curve shifts right and the supply curve shifts left, price will rise.

Section Two: Short Answer (250 words or less)

1. Define “Elasticity of Demand”. Give an example.

2. Define the “Law of diminishing Marginal utility”. Give an example.

3. Describe what likely happens to market price and quantity for the particular goods in each of the following examples. Will market price increase, decrease, stay the same or is it in-determinant? Will market quantity increase, decrease, stay the same or is it in-determinant?

4. Determine if the demand for the following products is price elastic or price inelastic, and explain your answer.

5. Name three types of market systems and give an example of each.